Four keys to finally understanding the world of APIs

Recently, APIs have become heart and soul some of the most ambitious projects and one of the most topical themes among technology experts. Most of these experts agree that APIs will revolutionize the Internet, but for the layman these three letters form yet another one of the many acronyms we stumble upon on a daily basis. Jose Manuel de la Chica, from New Digital Business- Engineering at BBVA, explains the four keys to understand what APIs are all about.

Despite its apparent complexity an API (Application Programming Interface) is nothing but a mechanism that allows software programs to communicate with another one that is completely unrelated to it, in terms of location, space or technology. It is, for instance, the system used on websites to embed Twitter and Facebook data, interact with LinkedIn, offer weather information from Weather.com or allow payments with Paypal while listening to Spotify.

Web APIs enable separate tools built by different companies to exchange their functionalities, data and interact among them. That is why some people say that APIs are the glue of the Internet, a technological binding agent that is powering the “Everything Connected” and “Internet of Things” era, which is now the buzz in the world of technology.

Tablets, mobiles, the cloud….all the technologies we assiduously use today have improved our lives enormously. So much so, that some people are starting to question whether this is affecting our mental abilities, as we now rely on our devices to take care of things that 20 years ago depended exclusively on our brain power.

2. What is the purpose of a web API?

APIs allow companies not only to embed third-party functionalities or data in their applications, but also to generate new business opportunities or ensure that their products reach new types of customers, helping them to grow the size of their markets. For example, Twitter’s CEO did not hesitate to say that the best thing anyone had ever done for his application was to build an API, as it was then that Twitter started becoming visible through thousands of third-party applications, besides the company’s own webpage and mobile app. Today, most of the traffic that Twitter receives is generated through its API.

Because the allow technology to evolve exponentially and each company to focus on its own developments, integrating whichever services or data it lacks through the most appropriate API supplier in each case. Also, in the online front, API “mashups” – combining one or more APIs into a single one – are truly allowing to deliver a whole that is greater than the sum of its parts, as the old saying goes.

Indeed, some say that the app revolution is, in fact, the API revolution. About 75% of mobile apps resort to some type of internal API to offer information or features to its users.

Finally, APIs have become a new channel for companies (just as webpages and mobile apps), and also a new type of product they can offer and open to new customers in exchange for a fee each time the API is used, or ‘called’.

2015 was arguably the year of financial technology – digital ways of delivering financial services offering a faster, more convenient and more useful experience to customers by combining platforms, channels and technology. Terms such as Unicorn, Blockchain, APIs and Accelerators became part of everyday conversation, companies such as TransferWise in the UK and OnDeck in the US began to eat into mainstream markets such as remittances and lending and capital rushed to embrace the investment opportunity offered by start-ups attempting digital disruption of financial services. For example, the UK, according to figures from London and Partners, had attracted $554 million of fintech investment by September 2015, compared to $487 million for the whole of 2014.

Some, companies, especially those that can offer relevant data and information, are aware of the value of the information they have and are already generating important business models using APIs as a product.

4. Could you give us an example of a successful web API based project?

The case of Netflix is, maybe, one of the quintessential examples that people use to illustrate the benefits of APIs, even if the company has changed many times its API use policy and its related strategy over time. But as the company itself acknowledged, it was through APIs that they were able to save unimaginable development and R&D costs. Thanks to the external developers that used their APIs, it was able to reach dozens of platform, operating systems and types of devices, at the same time it reached them through niche applications, specific and adapted to each type of end user. It was just like having hundreds of external developers building software around them, which allowed the company to grow its user base exponentially, while – thanks to co-creation and open innovation – keeping direct man-hour costs in development at almost negligible levels. In exchange, external developers had access to Netflix data and functionalities, thanks to which they were able to build or promote their digital businesses. A perfect example to illustrate that the use of APIs is the new way in which synergies can be created between companies and startups, while benefitting the end user: A triple win-win.

The travel industry that has also benefited extraordinarily from APIs, where, for companies such as Expedia or TripAdvisor, APIs have become one of their key sources of revenues, thanks to the popularity of travel price comparison engines such as Trivago or Kayak and online travel agencies (OTAs).

Atom is a mobile bank in which BBVA has a 29.5% stake. It is among the 10 most notable emerging startups in the world, according to Fintech 100, the report prepared by the consultancy KPMG in collaboration with the venture capital fund H2 Ventures.

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